U.S. stocks might be pricey, but David Rosenberg, chief economist at Gluskin Sheff + Associates, thinks they still look attractive relative to Treasurys and bonds given the bond curve.
Rosenberg explained that if stocks are expensive, it's only because Treasurys are "massively richly priced," as buyers are dominated by pension funds, central banks and sovereign wealth funds,
The Financial Post reported.
Rosenberg recommends U.S. technology stocks for his clients because they do not appear overpriced, have strong balance sheets and are experiencing growth.
He also called discretionary stocks a "virtual lock" to go higher because of an improving economy and lower import costs.
Rosenberg is finding value in Europe. He noted the broad European stock market is paying a 3.7 percent dividend.
"The ECB [European Central Bank] has no choice but to get more aggressive so the euro remains vulnerable, but that should be positive for large cap exporters," Rosenberg noted.
In particular, he said European financial stocks have been beat down and predicted they have more upside promise than downside risk, since some are trading at single-digit multiples.
Data from research from the Stock Trader's Almanac showed that the full-year direction of the broad U.S. stock market has tracked January's performance 77 percent of the time since 1950,
USA Today reported.
The newspaper said that how stocks perform at the start of a new year often influences how investors perceive the market for a longer period.
"If the stock market soars for five days and then whimpers back to unchanged by month end, it's very different than if it gradually trades up," said Woody Dorsey of research firm Market Semiotics. "If it's deemed to be bullish, it feeds into the Wall Street machine of pushing the upside bias."
Quincy Krosby, market strategist at Prudential Financial, said the stock market traditionally sees fresh cash inflows in January.
"January sees new money coming into the market, money that needs to be allocated. The infusion of capital comes from (employee bonuses), 401(k) re-allocations, rollovers from retirees, and new employees setting up accounts," Krosby told USA Today.
"Institutional money from global pension funds and endowments, sovereign wealth funds and global mutual funds (also) has to be put to work. This capital provides an important source of liquidity for markets."